Fraught freight: trade agreements, globalization, and rising global freight transport

Graph of global freight transport, trillions of tonne-kilometres
Global freight transport, all modes, trillions of tonne-kilometres, selected years, 1985 to 2050

Global freight transport now exceeds 122 trillion tonne-kilometres* per year. That enormous tonnage/distance has more than tripled since the beginning of the “free trade” era, in the 1980s.  And the Organization for Economic Cooperation and Development (OECD) projects that global freight transport tonnage will triple again in the coming generation—rising to 330 trillion tonne-kilometres per year by 2050 (see OECD).  To put these trillions into perspective, freight movement will soon surpass 100,000 tonne-kilometres per capita per year for those of us living high-consumption lifestyles, here and around the world.

*Note: a tonne-kilometre is equivalent to moving one tonne one kilometre.  If you move 10 tonnes 10 kilometres, that is 100 tonne-kilometres.

A major part of this increase in transport tonnage is related to trade agreements and globalization.  As we’ve restructured the global economy we have off-shored our factories.  Our washing machines, toasters, rubber boots, TVs, and many of our cars now come from half-way around the world.  Our foods and fertilizers are increasingly shipped across continents or oceans.  And we ship food, resources, and other goods around the world.  Economic growth means we’re consuming more and more; globalization means we’re consuming resources and products from further away.  These two trends, together, help explain the tenfold increase in global freight transport depicted in the graph.

Moving this colossal tonnage requires ships, trains, trucks, and airplanes—all of which burn fossil fuels and emit greenhouse gas (GHG) emissions.  Emissions from the freight transport sector make up about 10 percent of all man-made CO2 emissions (see OECD). The OECD predicts that if current trends and policies hold, emissions will nearly double by 2050, to 5.7 billion tonnes of CO2 per year (see OECD).  This near-doubling of freight transport emissions between now and 2050 will occur at the same time that we are attempting to cut overall GHG emissions by half.  It is time to ask the obvious questions: Is our ongoing drive toward globalization (i.e., de-localization and transport maximization) compatible with our emission-reduction commitments and a livable climate?  Indeed, as our leaders aggressively sign and implement still more “free trade” agreements (TPP, CETA, etc.) we should consider that  perhaps doubling down on globalization vetoes emissions reduction, vetoes a stable climate, vetoes local food, and vetoes local jobs.

To leave a comment, click on the graph or this post’s title and then scroll down.

Graph sources: 2015, 2030, and 2050 data from the OECD/ITF page 56. Data for 2000 and 1985 are from various sources: air freight data is from the World Bank. Rail freight data is from the World Bank. Maritime freight data is from the United Nations, Review of Maritime Transport. Road freight data for 2000 is from the OECD. Road freight data for 1985 is an informed estimate.




Cheap oil? Long-term US and Canadian crude oil prices

Graph of US and Canadian crude oil prices, historic, 1860 to 2016
US and Canadian crude oil prices, historical, 1860-2016

Many corporate spokespeople, government officials, economists, and journalists are repeating a very odd line: “oil prices are low.” Others talk of “cheap oil,” “plunging prices,” and a “crash.” Here’s one example, a 2016 headline from Maclean’s: “Life at $20 a barrel: What the oil crash means for Canada.”

I will argue that talk of “low oil prices” ignores history, misconstrues energy’s role in making civilizations, and confuses our efforts to build resilient, sustainable, climate-stabilizing economies. The graph above and the table below put recent oil prices into their long-term context. The graph covers the 156-year period from the first large-scale production of petroleum oil to the present: 1860 to 2016. It shows US average crude oil prices and Canadian prices for light sweet crude and heavy tarsands crude. For comparability, all figures are in US dollars and adjusted for inflation.

This table helps us interpret the data in the graph by showing average prices for each decade.

Canada and US crude oil prices, decade-averages, US dollars, adjusted for inflation
Canada and US crude oil prices, decade-averages, inflation-adjusted US dollars

Here’s what the graph and table can tell us about current “low oil prices.”

1. The graph shows that the very high 2003-2014 prices are an anomaly.

2. The $80 average price in the 2010s is the highest since the 1870s.

3. Even with recent declines, oil prices remain above the levels that held during the century from 1875 to 1975.

4. While prices have averaged $80 in the 2010s, the average price in the 1950s, ’60s, and ’70s was below $30. The greatest period of economic growth in global history, the postwar US boom, was accomplished with very cheap oil. As the cost of oil goes up, the cost of civilization goes up. If energy prices rise too high, we may no longer be able to afford to continue to build or even maintain our sprawling mega-civilization.

5. Many say that Canadian prices are particularly low relative to US or world prices. That isn’t the case. It’s not that Canadian oil is priced lower than US oil; rather, Canadian heavy (tar sands) oil is priced lower than US and Canadian light oil. The values in the table show this. The graph also shows this in the close correlation of US average oil prices with Canadian light oil prices. The right-wing think-tank The Fraser Institute explains that heavy oil from the tarsands and similar sources is priced lower because such oil “is more costly to transport by pipeline …. Further, the heavier the crude oil …, the lower its value to a refiner as it will either require more processing or yield a higher percentage of lower-valued by-products such as heavy fuel oil. Complex crudes containing more sulphur also generally cost more to refine than low-sulphur crudes. For these reasons, oil refiners are willing to pay more for light, low-sulphur crude oil.”

6. Western Canadians are particularly sensitive to “low oil prices” because our economy is dependent upon some of the highest-cost oil production systems in the world: the tar sands. We are the high-cost producers.

As the International Energy Agency (IEA) said recently, “Attempting to understand how the oil market will look during the next five years is today a task of enormous complexity.” I certainly cannot predict oil prices. And I’m not advocating lower prices. Just the opposite. As someone deeply concerned by climate change, I hope that oil prices rise and stay high, and that governments impose taxes on carbon emissions to push the cost of burning fossil fuels higher still. Nonetheless, we need to dispassionately interpret the data if we are to have any hope of directing our future and our economy. We need to be able to discern when energy prices are low and when they are not.

To leave a comment, click on the graph or the title and then scroll down.

Graph Sources: Canadian Association of Petroleum Producers (CAPP), Statistical Handbookfor Canada’s Upstream Petroleum Industry (October, 2016); and US Energy Information Administration (EIA), U.S. Crude Oil First Purchase Price


Agribusiness takes all: 90 years of Canadian net farm income

Graph of Canadian net farm income and gross revenues, 1926 to 2016
Canadian net farm income and gross revenue, inflation adjusted, net of government payments, 1926–2016.

Canadian net farm income remains low, despite a modest recovery during the past decade.  In the graph above, the black, upper line is gross farm revenue.  The lower, gray line is realized net farm income.  Both measures are adjusted for inflation.  And, in both cases, taxpayer-funded farm support payments are subtracted out, to remove the masking effects these payments can otherwise create.  The graph shows farmers’ revenues and net incomes from the markets.

The green-shaded area highlights periods of positive net farm income; the red-shaded area marks negative net income periods.  Most important, however, is the area shaded blue—the area between the gross revenue and net income lines.  That area represents farmers’ expenses: the amounts they pay to input manufacturers (Monsanto, Agrium, Deere, Shell, etc.) and service providers (banks, accountants, etc.).  Note how the blue area has expanded over time to consume almost all of farmers’ revenues, forcing Canadian net farm income lower and lower.

In the 23 years from 1985 to 2007, inclusive, the dominant agribusiness input suppliers and service providers captured 100 percent of Canadian farm revenues—100 percent!  During that period, all of farm families’ household incomes had to come from off-farm employment, taxpayer-funded farm-support programs, asset sales and depreciation, and borrowed money.  During that time, farmers produced and sold $870 billion worth of farm products, but expenses (i.e., amounts captured by input manufacturers and service providers) consumed the entire amount.

Bringing these calculations up to date, in the 32-year period from 1985 to 2016, inclusive, agribusiness corporations captured 98 percent of farmers’ revenues—$1.32 trillion out of $1.35 trillion in revenues.  These globally dominant transnational corporations have made themselves the primary beneficiaries of the vast food wealth produced on Canadian farms.  These companies have extracted almost all the value in the “value chain.”  They have left Canadian taxpayers to backfill farm incomes (approximately $100 billion have been transferred to farmers since 1985).  And they have left farmers to borrow the rest (farm debt is at a record high–just under $100 billion).  The massive extraction of wealth by some of the world’s most powerful corporations is the cause of an ongoing farm income crisis.

To leave a comment, click on the graph or this post’s title and then scroll down.

Graph sources: Statistics Canada, CANSIM matrices, and Statistics Canada, Agricultural Economic Statistics, Catalogue No.  21-603-XPE

Turning fossil fuels into fertilizer into food into us: Historic nitrogen fertilizer consumption

Graph of historic global fertilizer use, including nitrogen fertilizer, 1850-2015
Global consumption of nitrogen fertilizer and other fertilizers, historic, 1850 to 2015

Last week’s blog post (Feeding the World) showed that farmers worldwide had, since 1950, quadrupled grain production. How is this possible? The answer is fertilizer; more specifically, nitrogen fertilizer. This graph shows global fertilizer use. In 1950, farmers applied less than 5 million tonnes of nitrogen (measured in terms of actual nutrient, not fertilizer product). In 2015, farmers applied more than 110 million tonnes. We managed to increase grain output fourfold largely by increasing nitrogen inputs 23-fold.

Nitrogen fertilizer is a fossil fuel product, made primarily from natural gas. One can think of a modern nitrogen fertilizer factory as having a large natural gas pipeline feeding into one end and a large pipe coming out the other carrying ammonia, a nitrogen-rich gas. To produce, transport, and apply one tonne of nitrogen fertilizer requires an amount of energy equal to almost two tonnes of gasoline. One reason we have been able to increase grain production fourfold since 1950, and human population threefold, is that we found a way to turn fossil fuels into plant nutrients into enlarged food supplies into us. With fertilizers, we can convert hydrocarbons into carbohydrates.

Dr. Vaclav Smil is an expert on the material flows, nutrient cycles, and energy transformations that underpin natural and human systems. He believes that without the capacity to turn fossil fuels into nitrogen fertilizers into enlarged harvests, nearly half the 7.4 billion people now on Earth could not be fed and could not exist. Smil calls factory-made nitrogen “the solution to one of the key limiting factors on the growth of modern civilization.” This blog highlights the many ways humans have managed to remove the limiting factors to the growth of modern civilization.

Finally, 1950 was long ago. Surely rapid increases in fertilizer consumption must have tapered off in recent years. That isn’t the case. Canadian consumption is rising especially rapidly. A look at Statistics Canada data (CANSIM 001-0069) reveals that Canadian nitrogen fertilizer consumption has increased 65 percent over the past decade (2006 to 2016). Like many countries, Canada is boosting food output by increasing the use of energy-intensive agricultural inputs.

Graph sources: Vaclav Smil, Enriching the Earth; UN FAO, FAOSTAT; International Fertilizer Industry Association, IFADATA; and Clark Gellings and Kelly Parmenter, “Energy Efficiency in Fertilizer Production and Use.”

Exponential growth: US and Canadian GDP in the 20th century

US and Canadian Gross Domestic Product (GDP) historic
Canada and US Gross Domestic Product (GDP), 1900–2016

This graph shows the increasing sizes of the US and Canadian economies. The graph plots US Gross Domestic Product (GDP) on the left-hand axis, and Canadian GDP on the right. The time-frame is 1900 to 2016. The year 2000 is marked with an open circle, to highlight the 20th century. The units are trillions of US or Canadian dollars, and all figures are adjusted for inflation, that is, they are stated in 2016 dollars.

How much did these economies grow during the 20th century? US GDP in 1900 was $0.59 trillion dollars (in today’s US currency). In 2000, GDP was $14.3 trillion dollars—24 times larger. Canada’s economy in 2000 was 45 times larger than in 1900.

We can calculate the average annual growth rate. During the 20th century, the US economy grew at an average compound rate of 3.2 percent. We often hear growth rates of 2 to 3 percent described as normal. Indeed, if rates in the US or comparable nations fall below 2 percent, analysts warn of “slow growth.” Moreover, in recent years there has been consternation as Chinese economic growth rates have fallen from 9 or 10 percent per year to 7.

Can the US and comparable economies grow at rates in the 21st century that were “normal” in the 20th? Even if annual growth slows to an average of just 2 percent, the size of the US economy will increase 7-fold between 2000 and 2100. If the US economy grows at 2 percent per year throughout the 21st century, by 2100 the US economy alone will be more than twice as large as the global economy of 2000.

Growth rates of 2 or 3 percent per year, modest when considered over the short term, will, over several decades, cause an economy to double and redouble in size. Can we multiply the sizes of already-large national economies five- or ten-fold this century? Is it wise to try?

Graph sources: United States GDP: US Deptartment of Commerce, Bureau of Economic Analysis, NIPA Table 1.1.5; and Louis Johnston and Samuel Williamson, “What Was the U.S. GDP Then?” MeasuringWorth, . Canadian GDP: Statistics Canada CANSIM Tables 380-0566 and 384-0037; and M.C. Urquhart, “New Estimates of Gross National Product, Canada, 1870-1926…,” in Long-Term Factors in American Economic Growth, eds. Stanley Engerman and Robert Gallman (Chicago: University of Chicago Press, 1986)